What Is NFO

What Is NFO?

NFO or New Fund Offer refers to a mutual fund that an AMC wishes to issue to the public for the first time. Just like any existing mutual fund, the money raised from the various investors will be invested in various instruments such as stocks, bonds, government securities, money market instruments, fixed-income securities, etc., as mentioned in their scheme information document.

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NFO Meaning In Mutual Fund

NFO full form is New Fund Offer. It is slightly similar to the IPO launch in the primary market. IPOs are the shares that are launched by a company to raise money from the general public for their corporate purposes. Similarly, the NFO is launched by AMCs or fund houses to raise money from various investors for investing in instruments and then distribute the units to them on the basis of a fixed per-unit price.

An investor who subscribes first to the NFO will get it first at the fixed price of ₹10 per unit, which is set by SEBI (Securities and Exchange Board of India), where the subscription period is for a limited period of up to 30 days. After that, the units are allotted to the subscribers. 

If anybody wishes to invest after the subscription period, it is possible only at the current NAV of the mutual funds. NAV, or net asset value, is the price that an investor has to pay to purchase a single unit. If the NAV rises after the NFO subscription period is over, the investors are in a gaining position; otherwise, they are in a losing position.

Example of NFO: Suppose an NFO is launched at a fixed price of ₹10 and accumulates a ₹1500 crores. The AMC will calculate the total units that need to be distributed based on the accumulated funds and issue price, which is ₹1500 crores/₹10 = 150 crores units, which are proportionately allotted to each subscriber. 

If you have invested ₹2,00,000 in this NFO, you will be allotted ₹2,00,000/₹10, which is equal to 20,000 units. The total corpus is invested in securities, for which the prices will change on a real-time basis; hence, the price of the mutua